June 24, 2011
J.P. Morgan Chase & Co. has abandoned more than a thousand debt-collection lawsuits across the U.S. that sought to recover soured credit-card loans from borrowers.
The nation's second-largest bank by assets, including more than $100 billion in credit-card accounts, wouldn't disclose the number of cases dismissed or the reasons for the move. State judges said the bank has dropped lawsuits targeting borrowers in California, Florida, Illinois, New Jersey and New York since April.
In those five states, J.P. Morgan was owed $45.9 billion on outstanding credit cards as of March 31, including both current and delinquent accounts.
Thomas Donnelly, an Illinois state-court judge in Chicago, said lawyers for J.P. Morgan asked to withdraw all the pending collection cases in his courtroom this month, without explaining their decision. He allowed the bank to dismiss the cases without prejudice, meaning J.P. Morgan can refile them later.
At least for now, though, the borrowers won't be subject to one of the most effective debt-collection tools. Roughly 94% of collection cases filed against borrowers result in default judgments in favor of the lender, according to industry estimates.
J.P. Morgan spokesman Paul Hartwick wouldn't confirm or deny the lawsuit dismissals. In a statement, he said the New York bank considers "our collections strategy to be proprietary."
Mitch Granat, a lawyer who handles debt-collection cases for J.P. Morgan in Palm Beach County, Fla., on a contract basis, said he was told by other lawyers for the bank that the suits in Florida were dropped because of "irregularities" in paperwork used to verify the validity of the credit-card debt being pursued. Some judges have complained that J.P. Morgan and other credit-card issuers that go to court to collect what they are owed file lawsuits marred by sloppy or even fraudulent documentation of debts. J.P. Morgan hasn't been accused of wrongdoing related to credit-card cases in any court filings.
It isn't clear how common the problem is, though Philip Straniere, a state-court judge in Richmond County, N.Y., and other judges say deficiencies are worse than in foreclosure cases. "It's a significant problem…that's widespread and yet given virtually no attention," Judge Straniere said. Last year, Judge Straniere dismissed 150 credit-card-collection suits filed by J.P. Morgan, concluding paperwork submitted by the bank "appeared to be signed in large numbers by only a few individuals."
"Robo-signing," in which employees sign documents without reviewing them, sometimes hundreds of documents a day, unleashed the nationwide investigation of questionable foreclosure practices by mortgage lenders and servicers. J.P. Morgan is being scrutinized as part of the probe. The bank has said it hasn't discovered any faulty paperwork that resulted in wrongful foreclosures. State and federal officials are negotiating a settlement to the investigation of foreclosures that is likely to cost the companies more than $5 billion, according to company estimates. J.P. Morgan has said it is cooperating with regulators.
The amount of bad credit-card debt soared as a result of job losses and plummeting real-estate values. While the number of borrowers now falling behind on their payments is shrinking, J.P. Morgan and other credit-card issuers are working to collect older debts that went bad. Lenders usually file suits against borrowers only after phone calls, letters and other collection efforts fail.
The average amount sought in credit-card lawsuits is roughly $1,000, according to some judges who decide such cases.
Many lenders farm out debt-collection lawsuits to outside law firms. In contrast, J.P. Morgan predominantly uses a team of in-house lawyers scattered across the U.S. Last month, some of those lawyers say they were told by company officials that all the collection offices where they work will be shut down by the start of 2012. J.P. Morgan declined to comment.
In a federal-court lawsuit filed last year against J.P. Morgan in San Antonio, a former assistant vice president at the bank who worked on sales of delinquent credit-card loans, alleged that employees known as "attorney liaisons" signed "multiple stacks of affidavits" filed as part of credit-card lawsuits without "looking at any accounts at all."
The former J.P. Morgan assistant vice president, Linda Almonte, made similar claims in a whistleblower complaint filed with the Securities and Exchange Commission last year. The SEC hasn't responded to the claims. Mr. Hartwick, the J.P. Morgan spokesman, declined to comment on Ms. Almonte's allegations.
J.P. Morgan and Ms. Almonte agreed in April to settle her federal-court suit, which alleged she was fired after telling her bosses that nearly half the 23,000 accounts in a $200 million credit-card debt sale were missing proof of court judgments the bank claimed it had won.
Thousands of the accounts contained incorrect information about how much the borrower owed, she alleged. Terms of the settlement weren't disclosed. J.P. Morgan denied wrongdoing.
In April, Dale Pittman, a lawyer in Petersburg, Va., cited one of the J.P. Morgan attorney liaisons accused in Ms. Almonte's lawsuit of mishandling paperwork as part of Mr. Pittman's efforts to dismiss a credit-card case against his client.
Documents filed by J.P. Morgan as part of the debt-collection lawsuit included an affidavit signed by the attorney liaison, according to Virginia state-court records. J.P. Morgan later withdrew the case, records show. J.P. Morgan declined to comment on the case.
Lawyers who represent credit-card borrowers sued by J.P. Morgan said they have never seen the bank throw out so many debt-collection lawsuits at once. The cases were dropped starting in April and as recently as this week, according to lawyers and judges in the five states where J.P. Morgan has dismissed credit-card lawsuits.
Erik Kardatzke, a consumer-defense lawyer in Miami, said J.P. Morgan walked away during the past month from both of the pending lawsuits against borrowers he represents. The bank withdrew at least hundreds of additional cases in Florida, according to other lawyers.
J.P. Morgan Chase & Co. has abandoned more than a thousand debt-collection lawsuits across the U.S. that sought to recover soured credit-card loans from borrowers.
The nation's second-largest bank by assets, including more than $100 billion in credit-card accounts, wouldn't disclose the number of cases dismissed or the reasons for the move. State judges said the bank has dropped lawsuits targeting borrowers in California, Florida, Illinois, New Jersey and New York since April.
In those five states, J.P. Morgan was owed $45.9 billion on outstanding credit cards as of March 31, including both current and delinquent accounts.
Thomas Donnelly, an Illinois state-court judge in Chicago, said lawyers for J.P. Morgan asked to withdraw all the pending collection cases in his courtroom this month, without explaining their decision. He allowed the bank to dismiss the cases without prejudice, meaning J.P. Morgan can refile them later.
At least for now, though, the borrowers won't be subject to one of the most effective debt-collection tools. Roughly 94% of collection cases filed against borrowers result in default judgments in favor of the lender, according to industry estimates.
J.P. Morgan spokesman Paul Hartwick wouldn't confirm or deny the lawsuit dismissals. In a statement, he said the New York bank considers "our collections strategy to be proprietary."
Mitch Granat, a lawyer who handles debt-collection cases for J.P. Morgan in Palm Beach County, Fla., on a contract basis, said he was told by other lawyers for the bank that the suits in Florida were dropped because of "irregularities" in paperwork used to verify the validity of the credit-card debt being pursued. Some judges have complained that J.P. Morgan and other credit-card issuers that go to court to collect what they are owed file lawsuits marred by sloppy or even fraudulent documentation of debts. J.P. Morgan hasn't been accused of wrongdoing related to credit-card cases in any court filings.
It isn't clear how common the problem is, though Philip Straniere, a state-court judge in Richmond County, N.Y., and other judges say deficiencies are worse than in foreclosure cases. "It's a significant problem…that's widespread and yet given virtually no attention," Judge Straniere said. Last year, Judge Straniere dismissed 150 credit-card-collection suits filed by J.P. Morgan, concluding paperwork submitted by the bank "appeared to be signed in large numbers by only a few individuals."
"Robo-signing," in which employees sign documents without reviewing them, sometimes hundreds of documents a day, unleashed the nationwide investigation of questionable foreclosure practices by mortgage lenders and servicers. J.P. Morgan is being scrutinized as part of the probe. The bank has said it hasn't discovered any faulty paperwork that resulted in wrongful foreclosures. State and federal officials are negotiating a settlement to the investigation of foreclosures that is likely to cost the companies more than $5 billion, according to company estimates. J.P. Morgan has said it is cooperating with regulators.
The amount of bad credit-card debt soared as a result of job losses and plummeting real-estate values. While the number of borrowers now falling behind on their payments is shrinking, J.P. Morgan and other credit-card issuers are working to collect older debts that went bad. Lenders usually file suits against borrowers only after phone calls, letters and other collection efforts fail.
The average amount sought in credit-card lawsuits is roughly $1,000, according to some judges who decide such cases.
Many lenders farm out debt-collection lawsuits to outside law firms. In contrast, J.P. Morgan predominantly uses a team of in-house lawyers scattered across the U.S. Last month, some of those lawyers say they were told by company officials that all the collection offices where they work will be shut down by the start of 2012. J.P. Morgan declined to comment.
In a federal-court lawsuit filed last year against J.P. Morgan in San Antonio, a former assistant vice president at the bank who worked on sales of delinquent credit-card loans, alleged that employees known as "attorney liaisons" signed "multiple stacks of affidavits" filed as part of credit-card lawsuits without "looking at any accounts at all."
The former J.P. Morgan assistant vice president, Linda Almonte, made similar claims in a whistleblower complaint filed with the Securities and Exchange Commission last year. The SEC hasn't responded to the claims. Mr. Hartwick, the J.P. Morgan spokesman, declined to comment on Ms. Almonte's allegations.
J.P. Morgan and Ms. Almonte agreed in April to settle her federal-court suit, which alleged she was fired after telling her bosses that nearly half the 23,000 accounts in a $200 million credit-card debt sale were missing proof of court judgments the bank claimed it had won.
Thousands of the accounts contained incorrect information about how much the borrower owed, she alleged. Terms of the settlement weren't disclosed. J.P. Morgan denied wrongdoing.
In April, Dale Pittman, a lawyer in Petersburg, Va., cited one of the J.P. Morgan attorney liaisons accused in Ms. Almonte's lawsuit of mishandling paperwork as part of Mr. Pittman's efforts to dismiss a credit-card case against his client.
Documents filed by J.P. Morgan as part of the debt-collection lawsuit included an affidavit signed by the attorney liaison, according to Virginia state-court records. J.P. Morgan later withdrew the case, records show. J.P. Morgan declined to comment on the case.
Lawyers who represent credit-card borrowers sued by J.P. Morgan said they have never seen the bank throw out so many debt-collection lawsuits at once. The cases were dropped starting in April and as recently as this week, according to lawyers and judges in the five states where J.P. Morgan has dismissed credit-card lawsuits.
Erik Kardatzke, a consumer-defense lawyer in Miami, said J.P. Morgan walked away during the past month from both of the pending lawsuits against borrowers he represents. The bank withdrew at least hundreds of additional cases in Florida, according to other lawyers.
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